Samalayuca II was Mexico’s first quasi-IPP, and the project sponsors and the Mexican government had to resolve many legal issues related to the contract structure and project financing never previously raised in Mexico. Merida III, discussed in Chapter 8, was Mexico’s first true IPP; it is the first build-own-operate (BOO) power plant and has a conventional 25-year power purchase agreement (PPA) to sell power to the Comision Federal de Electricidad (CFE) and a 25-year fuel supply contract to purchase natural gas from Pemex through the CFE. In the past, the CFE provided virtually all the specifications for a power project and the developer bid a price as well as qualifications to do the job. More recently, IPPs negotiated with the CFE have allowed their sponsors increasing flexibility with regard to site selection, fuel supply, and sale of excess power. InterGen’s Bajio and La Rosita plants, discussed in Chapter 9, were deliberately oversized so as to be able to offer a lower price to the CFE and to export power to the United States. One of the most important trends with recent IPPs in Mexico has been delinking PPAs and fuel supply agreements. With Samalayuca II and Merida III, the CFE not only bought the plant’s electricity under the PPA, but also acted as the intermediary for the purchase of fuel from Pemex. Now developers are concluding PPAs and fuel supply agreements separately, thereby assuming both fuel-supply and fuel-price risk. As IPPs take on more of those risks, lenders tend to require lower project leverage and more sponsor support. A long-standing question has been whether the CFE may be privatised some day, an event that would put IPP loans into default, but that is unlikely to occur in the near future. The Fox Administration has concentrated on efforts to make the IPP programme more attractive to developers. Recent initiatives have included efforts to develop a private bilateral contract market and a methodology for private plants to place excess power on the national grid at prices that are competitive with the CFE’s power plants.